The chart below shows the Williams Alligator applied in a Microsoft chart. The Bill Williams Market Facilitation Index indicator is designed to measure the willingness of the market to move the price. It is basically an assessment of how market prices react to new volume in the market. By assessing price change and tick volume, the BW MFI can give a comprehensive assessment of market behaviour and prevailing sentiment. It essentially filters out potentially false price movement to ensure that traders only take trades in ideal market conditions.
The Big Trades indicator shows large single sales at the market price. Moreover, we see a long tail on the Delta indicator which means that a buyer has entered the market. It is reasonable to expect a bounce off 1770 level under these conditions. Unfortunately, the Alligator indicator is not able to capture these important nuances for analysis.
Alligator Line Cross
The indicator is specifically purposed to ensure that traders only place their trades in optimal trending markets. It is aptly named ‘alligator’ because it mimics the feeding habit of the animal and can help traders pick out the best times to ‘feed’ on the pips available in a trending market. The Alligator indicator is composed of three smoothed moving averages. Traders will occasionally add an “Oscillator” like the “CCI”, as above in Aqua, to enhance the value of the trading signals.
When the lips turn to cross over the teeth and jaws it is said that the alligator is waking, and that means a potential trend is forming. The Fractal indicator has many applications in trading. To start with, it can pinpoint the areas where traders can place their stop losses and take profit orders. It also identifies the action zones where traders should watch price action keenly. But in all fairness, it is not a comprehensive indicator, and it works best when combined with the Alligator indicator.
Example of an Alligator Indicator strategy trade
To increase the performance of trading signals, you should use additional filters such as Fractals. In this case, you should look for an entry in the opposite direction. There is no point in holding the trade even if the Stop Loss is set beyond the blue. Expect when the hourly candlestick breaks through the most recent downward fractal and closes below. This will signal that there should be an entry point to open a position following an uptrend. To enter a buy trade, the Alligator should be waking up.
It generates the https://trading-market.org/ points at the momentum inception and signals the trend exhaustion. The Fractals indicator perfectly complements the Alligator. The combined application of the two Williams’s indicators provides accurate entry points, with the Fractals tool serving as an additional filter. You enter a trade at the fractal breakout when the market trend has already acquired a direction. It is the first to react to the changes in the balance of buyers and sellers in the price chart. When the lip line crosses slower MAs, we could assume that the trend is about to start.
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If you want to adjust Alligator settings to different timeframes, you should perfectly understand this indicator’s work principles. It should be borne in mind that the shorter the working timeframe, the greater values should be set for the indicator formula. The longer the timeframe, the smaller the values can be set into the formula. The Jaws blue lines display the border of the medium-term trend. If the price breaks this line, it usually means that the trend is turning in the opposite direction. It is used to spot the entry points in slow trends or in conservative forex trading strategies when traders prefer to trade only in the strongest levels/zones.
Example of strategy on standard indicators
However, trading on margin comes with added risk, as you could lose more than your initial deposit. That’s because you’ll still get exposure to the full value of the trade, and both your profit and loss is based on the full value. To get the alligator indicator formula, you must first determine the median price of each candlestick, which is calculated as (high price + low price) / 2.
Wait for the fastest line to cross the other lines upside down. Remember that other indicators may give a confirmation too. We’ll talk more about it in the ”How to Combine the Alligator Indicator” section. Research & market reviews Get trading insights from our analytical reports and premium market reviews. FAQ Get answers to popular questions about the platform and trading conditions. Figuring out what is MACD & how to use the Moving Average Convergence Divergence indicator to make a profit.
Swing Trading Alligator Line Crossovers
One must remember that the Alligator, since it consists of moving average crossovers and is shifted ahead, will lag more than the CCI. The CCI will send the first alert, followed by the Alligator crossover and a closing candle above or below the three moving averages . The course of the moving averages simply identifies the trend direction. If they move down and widen even more, it’s a strong downtrend signal. If they move up and diverge from each other, it’s a sign of a strong uptrend.
We have also focused on some relatively unknown indicators like the Keltner Channel and the Donchian Channel. Use the free and unlimited AvaTrade demo account to test, tweak or optimise your Bill Williams strategies without risking any of your money. Use Bill Williams indicators on our trading platforms, including MT4 and MT5.
Williams Alligator Definition
It serves to enter trades when the trend is not that strong. If the instrument is within the daily ATR , the Teeth line can be an excellent marker for entering trades in the trend. The exit signal appears when all three lines meet at one point, the trend direction is not clear, or when the lip line crosses the one of the three lines which is the jaw. This means that the market is full and will now “sleep” in anticipation of new prey . The majority of trades see the trend exhaustion, the accumulation zone forms, there arises uncertainty. Moving averages are the price derivatives, so if there is a price chart, and you can attach moving averages to the chart, such a market can be analyzed using the Alligator.
- CFDs are leveraged products, which means you can trade on the upward or downward price movements without owning the underlying assets.
- The bigger the distance between the lines, the stronger the trend is.
- It is very important to watch the location of the price on several time-frames which you can choose depending on the way you trade.
- These are the Alligator indicator default parameters offered in the LiteFinance client profile.
- When the lines converge or cross, it is time to consider entering or exiting, although a momentum indicator will fix a better exit point.
No matter your experience level, download our free trading guides and develop your skills. To learn more about indicators you could combine with the Williams Alligator, read our Technical Analysis section. The Alligator gives better results as a single on chart tool. Above is a 15-minutes chart of Bank of America from Sep 26-29, 2015.
Research led the https://forexaggregator.com/r to the conclusion that the market is chaos and trading is a psychological game. Knowing the psychology and understanding the principles of behavior of market participants, the zones of accumulation and the price’s exit points from these zones are determined. Bill Williams Alligator is a trend indicator included in most trading platforms by default.
Before making an https://forexarena.net/ decision, you should rely on your own assessment of the person making the trading decisions and the terms of all the legal documentation. This Alligator signal was also confirmed by the strong move down as the Alligator lines spread out. The first MA with time period of 13 and shift for 8 bars’ forward is called the Alligator’s Jaw.